Tax Lien Investing - Thoughts?

Question

I am going into my Junior year in college and am looking to get into real estate investment for sure when I graduate, and maybe even house hack a duplex senior year. But, I have been looking into tax lien investing lately. I know the foreclosure rate is only like .5% and takes 6 months to 2 years from start to finish if a lien goes unpaid. I was debating buying some tax liens in my area around school. I figure if I get paid or not, I either get good interest or a property in my last 2 years at school. I was wondering if anyone else has done any tax lien investing and had any sort of success with it? I assume the major pitfalls are not doing your due diligence and complying with all the rules involved with notifying effected parties, difficulty collecting payment, and cost/time it takes to foreclose if need be. I just figured if I can get lucky and get a property for a fraction of the market value at a time where I  and am a full time student and will not be able to qualify for any sort of financing why not try it?

Jay Hinrichs · Answer

@Ned Carey  I think like a lot of things real estate related concept is pretty easy to understand but execution can be quite difficult for a variety of reasons as you delineated...

It kind of reminds me of those that watch some u tube on buying foreclosures get all cranked up waste a year and never get one because the prop they hone in on never actually sells.. people go BK it redeems or they get out bid..

Or when I thought I would go to Mississippi with some cash .. boy did the locals school me on that one.. I took 100k to the auction.. it went so fast and so much money was flying I took a stab at about 15 to 20k worth .. told my wife we are going home we are totally out of our comfort zone here.. and I don't think a one ever redeemed or I lost interest in them and never followed them.. so just blew that money off.

Ned Carey · Answer

@Benjamin Lewis tax liens are sold at auctions which can be quite competitive.  On the surface the idea you get either high interest rate or a property just for the amount of the taxes sounds great. The hitch is the competition generally drives up the price of the house, or the interest rate  down, or a combination of the two.

You need to understand the rules where you are buying. We have lots of tax lien experts here so If you say where you are you may get very specific help. That said, you will learn a ton just by participating.  Please just make sure you do enough preparation to prevent yourself from being burned.

Peter M. · Answer

Tax lien/deed investing can be a good investment but like you said, it all depends on your due diligence. It also depends which state you are in. If you are in a strictly tax lien state and you buy a residential lien, it would be 2 years before you get the deed. By then you will have graduated. It just depends on your goals and how much money you have to invest.

Ankit Patel · Answer

Tax lien is good investment if you do your research and be patient. Most of the taxes liens are get redeemed. There is so much competition at the auction. In New Jersey lien go over $5K to $10K premium hoping that investor will have chance to collect 18% interest and penalty on subsequent payment.  Lot of big banks and Hedge funds are heavily involved in this market.

Lan Gooch · Answer

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How long ago was that?  Is there a thread on BP about it?  I'd like to hear more.

I've been buying tax liens in MS for 9 years, and I'm looking forward to auctions at the end of this month.

Many that I've attended have been hectic, and very competitive, but I've enjoyed good returns.

Tax Lien Investing - Thoughts?

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